After a conversation with David Geilhufe (www.digitaldivide.net/blog/geilhufe) about perfect information, specifically in its relevance to philanthropy, I got to thinking. I googled. I wikipedia'd. and...
I found a fascinating post that provides a critique of the "perfect information" or economic equilibrium theory that states that the better (or more predictable) our information is, the more efficient (equitable?) our markets will be. The author, astutely I believe, critiques this lens as irrelevant in a world where change, both subtle and grand, is the norm.
However, at the end of the article, the author then backtracks to essentially say that, yes perfect information is the best case scenario and even though we cannot achieve it, it is what we want and the greatest enemy to perfect information is an "activist" government because activist governments "increase disorder in society".
While from the perspective of approximating perfect information this may very well be true, (from any perspective this may very well be true) it seems that a more cogent response to this reality of change is to look for a deeper understanding of the patterns in the flow. How and when are perturbations created. What does human interference, interaction do to the flow of information.
The author does take a short detour to look at the relevance of perfect information to politics but dismisses politics by saying:
"government lacks prices and genuine entrepreneurship, and substitutes coercion for voluntary trade."
Essentially, he is further digging in to a perfect information as best case scenario paradigm where the free market is the best possible arbiter. However, it seems to me, if we assume change (and more interestingly, flow) that patterns are far more interesting than triggers.
Assuming perfect information as the guiding principle is like studying physics by ignoring friction. It is an interesting intellectual device.
The Economics of Groundhog Day
By D.W. MacKenzie
Posted on 8/30/2006
In economic terms the final reliving of the day constitutes what economists refer to as a perfectly competitive equilibrium based on perfect information.
The problem with equilibrium theorizing is that it assumes that the fundamental conditions of the world do not change. That is, it assumes that we simply play the same game over and over again without any fundamental structural change.
Free-market capitalism allows for a degree of coordination that no other system can match. Those who hold capitalism to a standard of perfection ignore the fact that activist governments have failed to attain anything better, and have often made matters worse.
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